Carney Rebuts Attacks on BOE as Ex-Governor Slams Brexit Study

(Bloomberg) -- Mark Carney launched a vigorous defense against “unfair” criticism of the Bank of England’s Brexit analysis, after a series of attacks including one only hours earlier by his predecessor as governor.

Carney told the U.K. Parliament’s Treasury Committee -- which asked for the report -- that the work was the result of two years’ effort involving about 170 staff and wasn’t an overnight “exam crisis.” It laid out a potentially chaotic outcome if Britain has a disorderly exit from the European Union -- prompting former Governor Mervyn King to say key assumptions aren’t plausible.

“We don’t have the luxury of holding back material which we have produced, that is directly relevant to our responsibility, from this committee if it’s demanded,” Carney told lawmakers. “Your colleagues would do well to remind those in the press, those in Parliament, that you asked for it.”

Flimsy Assumptions

King attacked the deal in a column for Bloomberg Opinion, and took a swipe at the BOE.

“It saddens me to see the BOE unnecessarily drawn into this project,” he said. “Before the referendum, official economic projections intended to scare the country into voting Remain didn’t succeed. Based on flimsy and arbitrary assumptions, they were subsequently proved wrong. The same strategy has resurfaced.”

The analysis outlines a scenario for a no-deal Brexit -- Carney has repeatedly said it’s not a forecast -- in which the economy shrinks by 8 percent within a year, property prices plunge almost a third and the pound loses a quarter of its value. The lack of a deal is looking possible as legislators line up to say they won’t support it when parliament has a vote.

Carney elaborated on the study, saying shoppers could see their bills rise 10 percent in the most extreme case. The BOE backed up the analysis by publishing a survey by its network of agents that suggests companies expect output to fall by between 2.5 percent and 6.9 percent over the next 12 months in such a scenario.

Tuesday’s hearing featured some testy exchanges, with the governor at one stage asked to answer like a human, rather than an economist, and responding to a question by telling a lawmaker “don’t assert what isn’t correct.”

Simpler Times

Carney also defended the BOE’s broader remit to focus on financial stability, instead of just inflation, as it did when King was in charge. Things were “simpler” then but “we know how that turned out,” he said.

The exchanges weren’t as personal as they might have been. Lawmaker Jacob Rees-Mogg, a leading Brexit supporter and previous member of the Treasury Committee, last week called Carney a “second-tier Canadian politician” and accused him of failing to understand his role.

At Tuesday’s session, the governor found one of his usual sparring partners actually springing to his defense.

Labour’s John Mann thanked the governor for the analysis, which he said was “vital as part of this country’s democracy,” and dubbed Rees-Mogg’s remarks as being “contemptuous of Parliament.”

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